Aim for a credit score of at least 750 in order to ensure you will not need to make a down payment. Work to improve your credit score before you apply for a mortgage. Review your credit report and rectify any errors. Pay off all outstanding debt and make sure your bills are paid on time regularly. Stop applying for credit about 1 year before you buy your apartment.
What Kind of Property Can You Buy?
You can purchase apartment buildings with five or more units, including mixed-use (commercial and residential space) buildings as long as at least 80% of the space is residential. The building must be graded at least C+ to be eligible for financing — that is, it can’t be rented daily or weekly, it can’t have single-occupancy rooms (like rooming houses), excessive deferred maintenance or obsolescence, or a private well. The property must have been at least 85% occupied for at least the last 90 days before loan application.
What Do You Need to Provide? Applying for an apartment mortgage is different than applying for a home loan in that the property’s ability to pay for itself is more important than your personal financial position. You need to provide the following:
- Personal financial statement or Fannie Mae Form 1003 (mortgage application);
- The property’s current rent structure;
- Two years’ worth of schedule Es for the property or two years of operating income statements;
- A year-to-date operating income statement;
- Month-by-month income breakdown of the past 12 months;
- Photos of the property; and
- A copy of the purchase agreement.
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